Philly Fed Manufacturing Plunges as Recession Fears Rise

[February 17, 2023](Reported by English Epoch Times reporter Bryan Jung/Compiled by Zhang Zhi) Manufacturing activity in the mid-Atlantic region unexpectedly fell sharply in February, increasing people’s concerneconomic recessionconcerns.

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Commodity producers reported that input costs surged for the first time in 10 months, even as the pace of company price increases slowed, suggesting margin pressures are worsening.

philadelphia fedThe February manufacturing index fell to -24.3 this month from -8.9 in January, after many economists had expected the index to improve for the third straight month.

A reading below zero indicated a contraction in manufacturing activity this month, while economists polled by Reuters had earlier expected a median reading of -7.4 in February.

It was the sixth straight negative reading and the lowest reading since May 2020, which preceded it during the Great Recession in April 2009.

philadelphia fedThe survey, which covers manufacturing companies in the Third Federal Reserve District, which includes eastern Pennsylvania, southern New Jersey and Delaware, is often used to analyze the direction of changes in business activity.

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Orders and activity down in February

Metrics tracking new orders, shipments, delivery times and headcount across the region all fell in February.

Data for February showed that business activity fell at a faster rate than in January, with 31% of companies surveyed reporting worsening business conditions, while only 7% gave a positive survey result.

Most of the survey’s indicators lowered expectations for growth over the next six months, as the overall future activity index fell to 1.7 in February from 4.9 a month earlier.

Some 29 percent of businesses surveyed expect activity to increase, while 27 percent expect a decline.

There was also a sudden drop in commodity demand in the latest report this month.

The new orders index fell to -13.6 in February from -10.9 in January, while the shipments index fell to 8.7 from 11.1.

The employment index fell to 5.1 from 10.9, however, most companies still reported stable employment levels.

The outstanding orders index climbed to -17.0 from -19.2 as the backlog of orders continued to shrink.

The lead time index fell to -13.6 from -5.6, as supplier delivery times shortened after years of delays during the pandemic.

Prices are expected to rise

The two price indices in the survey, which are closely watched measures of inflation by the Fed, showed some price increases overall but remained in line with long-term averages.

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The price index paid edged up to 26.5 from 24.5, the first increase since April 2022, while the income price index (crops and livestock) (Prices received index) fell nearly 50% to 14.9, the lowest reading since February 2021.

Meanwhile, according to a report from the Philadelphia Fed, the report forecasts smaller gains in U.S. consumer prices over the next 12 months compared to the last questionnaire in November.

Respondents also reported that they expect to implement a 4.5% price increase to customers through 2024, down from 4.8% in November and from last year’s forecast of a 7% price increase.

Producers’ median forecast for inflation next year rose 4 percent, down from a 5 percent forecast in a November poll.

However, manufacturers’ expectations for long-term consumer inflation over a 10-year period fell to 3 percent from 4 percent.

Wage growth is also expected to slow to 4.8 percent in the year ahead, down from 5 percent in the November survey.

Several policymakers at the Federal Reserve are looking to a reversal in the trend in interest rates as a signal that high inflation continues to abate.

On February 1, the Federal Reserve raised the borrowing rate by 25 basis points to a range of 4.50% to 4.75%.

Federal Reserve Chairman Jerome Powell said after the policy meeting that further rate hikes are expected as inflation remains well above its 2% annual target.

(Reuters contributed to this article)

Responsible editor: Li Muen#